When the Balloon Pops

A balloon payment is the payment of a sum of money that's become due and payable all at once.

Instead of taking out a mortgage in the customary way, such as amortizing the loan for a long time as in the 20 or 30 year variety, the principal amount of the loan becomes due and payable in a shorter period of time, such as anywhere between one and ten years although balloon payments can fall anywhere within that time frame, such as 3, 5, or 7 years.

Balloon payments can destroy a borrower if they don't understand their complexities. When that big payment comes due, and the intitial payment schedule ends, it can wreck financial havoc with a borrower if they're not prepared to fess up to the obligation they've undertaken.

If refinancing's not an option.....UH OH !

How about it lenders ? What about the balloon payment and what kinds of experiences have you had in recent days with this type of loan instrument ?

Posted by

Time&Temp Memphis

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